Risks in investing stocks
Investing in stocks can provide great returns. But stocks can go down too. Let’s see what could be the worst-case scenario? What is history telling us?
The great depression happened in 1929 when the stock market crashed. It was called Black Monday black Tuesday, not only because numbers went way down the stock market crashed down. It wasn’t good that unexpectedly on Monday, the stock went down to 12 points with 8% that was almost 13 percent in one day. The entire market boomed down to 13% and on the following day down to 11 points 7% in two days, and it continued. So within two days, 23 to 24 percent of return on investments were gone.
Everybody’s quarter of the stock market portfolio went down 2% in two days. And how long that might take to make up for it.
Let’s see an interesting analysis of how returns bounce back and how people survive these worst-case scenarios?
Let’s have an analysis of that situation. Let’s go to www.moneychimps.com
This is the backslash features market, backslash CAGR.
Just go and search money chimp compound annual growth rate or CAGR you’ll find to get the link there. When you enter the dates of 1929 to 1939, you will see the standard deviation of 31%, which is a considerable number. 31% is a substantial risk, which shows 30% lost every ten years. But there, you would see if stocks were held for a long time. If $1US is invested, it has shown growth to 89%.
As you can see, even in the worst scenario, although the risk was very high, in the long term, stocks have shown growth and good returns.